The pharmaceutical sector has warned of a crisis-like situation and a severe shortage of lifesaving drugs following high cost of inputs/raw materials due to 17 percent sales tax and non-payment of sales tax refunds.

Pakistan Pharmaceuticals Manufacturing Association (PPMA) Chairman Qazi Mansoor Dilawar told Business Recorder here on Monday that the Federal Board of Revenue (FBR) would be responsible for this crisis-like situation in the pharmaceutical sector, as they are not ready to understand the genuine and legal issues of the industry.

The FBR had formed a committee in Karachi to resolve the sales tax refund related issues, but so far no meeting has been held.

The shortage of medicines has started in the market. The lifesaving products are not available and there would be a major shortage of drugs in the country. The FBR would be solely responsible for this situation, he warned.

The cost of raw materials has been considerably increased since imposition of standard rate of 17 percent sales tax on the import of the active pharmaceutical raw materials since January 16, 2022. The rupee-dollar parity is increasing day by day. However, no mechanism has been devised for the payment of refunds to the pharmaceutical sector, Dilawar stated.

As refunds are not paid, the cost of the finished products is also rising day by day.

The pharmaceutical companies are totally dependent upon the imported raw materials which are now subject to 17 percent sales tax.

If this situation continues, there would be a shortage of medicines used in emergency-like situation and first aid including drips and IV. There is also an apprehension of shortage of heart-related medicines in the country.

He added that the FBR needs to take decision immediately to pay refunds on the basis of purchases as it took around 1-2 years for full consumption of raw materials and subsequent sales of the finished products.

The industry wants refunds on the basis of “purchases” and not consumption based.

It took 1-2 years for full consumption of sales tax paid imported raw materials and subsequent sales of the finished products in the domestic markets. Therefore, the finance minister is very much serious to address the issue of refund payments on some kind of purchases-based mechanism, Dilawar stated.

There is so much pressure of the industry to give a strike call, but when the finance minister is committed to resolve the issue there is no justification of strike.

However, if the refunds are not timely paid to the pharma industry, there would be severe shortage of medicines and life-saving drugs in the country, the PPMA chairman said.

The industry demanded GST refunds on purchase instead of consumption. The refunds on consumption basis means stuck of huge amount for minimum one year, which is out of reach for small companies. The industry assured the FBR that, all concerns of the FBR in this connection shall be addressed by the pharma industry based on the FBR favor with industry, Dilawar added.

The story was originally published in Business Recorder on April 05, 2022.